Shriram City Union Finance Companyname

RESULT UPDATE

SHRIRAM CITY UNION FINANCE Bracing for near-term challenges

India Equity Research| Banking and Financial Services

COMPANYNAME Shriram City Union Finance (SCUF) reported below estimated Q1FY21 PAT EDELWEISS 4D RATINGS of INR1.9bn on higher provisions (covid-19 related) even as core Absolute Rating BUY performance came in line with estimate (albeit, softer). Headline asset Rating Relative to Sector Performer quality held up on lower slippages--a natural and wholly expected Risk Rating Relative to Sector Medium corollary of the moratorium option. Collection efficiency (>70% in June) Sector Relative to Market Overweight and moratorium (at 25%) have been steadily improving, but sustenance is key. Further, scope of application of the restructuring scheme and eligibility under the ECLGS scheme will be critical to fortunes. As MARKET DATA (R: SHCU.BO, B: SCUF IN) anticipated, business momentum decelerated with >6% YoY dip in AUM. CMP : INR 662 This, combined with lower NIM (down 13bps QoQ), led to tepid core. Target Price : INR 1,080 52-week range (INR) : 1,572 / 617 That said, valuations at 0.6x FY21E P/BV render comfort. Maintain ‘BUY’ with TP of INR1,080. Target multiple of 1.0x FY22E P/BV accounts for Share in issue (mn) : 66.0 M cap (INR bn/USD mn) : 44 / 2,273 higher uncertainty around its key operating segment (SME) and Avg. Daily Vol.BSE/NSE(‘000) : 16.9 possibility of a less-than-favourable merger ratio in the three-way merger envisaged in Shriram Group restructuring. SHARE HOLDING PATTERN (%)

Current Q4FY20 Q3FY20 Asset quality holding up; outlook uncertain Promoters * 33.9 33.9 33.9 Asset quality improved with stage-3 assets declining to 7.3% (from 7.9%) with MF's, FI's & BK’s 5.6 5.9 5.9 improvement across segments (ex-personal loans), partially a reflection of moratorium FII's 26.8 27.4 27.4 at play. Going forward, we remain cautious in one of its key operating segments (SME), Others 33.6 32.8 32.7 which though improving from the early Q1FY21 trough, needs monitoring. This * Promoters pledged shares : NIL segment, we believe, will shape the company’s asset quality outcomes. (% of share in issue)

PRICE PERFORMANCE (%) Core metrics continue to be soft Growth remains soft with disbursements at INR13.3bn, which led to AUM falling 6% EW Banks and Stock Nifty Financial YoY/2% QoQ to INR284bn (broadly in line with estimate). Within segments, growth was Services Index largely supported by gold loans and used 2W segment as other segments remained 1 month (2.1) 2.7 (3.5) relatively tepid. Given weak growth and limited levers for NIM improvement, we 3 months (9.6) 10.5 (3.2) expect core momentum to remain weak in the near term. 12 months (53.1) (1.0) (25.0)

Outlook and valuation: Valuation comfort; maintain ‘BUY’

Events over the past two years have tested SCUF’s resilience, particularly given its reliance on the self-employed segment. The company responded by going slow on growth and recalibrating collection strategies to navigate the challenging environment. Covid-19 additionally renders the near-term outlook challenging. Post a deep correction, the stock Santanu Chakrabarti +91 (22) 4342 8680 trades at 0.6x FY21E P/BV, rendering comfort. We maintain ‘BUY/SP’. [email protected]

Financials (INR mn) Prakhar Agarwal Year to March Q1FY21 Q1FY20 Growth (%) Q4FY20 Growth (%) FY20 FY21E FY22E +91 22 6620 3076 Net revenue 8,771 9,557 (8.2) 9,038 (3.0) 37,890 38,731 40,976 [email protected]

Net profit 1,923 2,532 (24.1) 1,531 25.6 10,159 9,091 9,287 Vinayak Agarwal Dil. EPS (INR) 29.1 38.4 (24.1) 23.2 25.6 153.8 137.6 140.6 +91 22 6620 3020 Adj. BV (INR) 964.6 1,009.4 1,076.1 [email protected]

Price/ Adj book (x) 0.7 0.7 0.6

Price/ Earnings (x) 4.5 5.0 4.9 August 11, 2020 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited

Banking and Financial Services

Table 1: Q1FY21 earnings snapshot…. (INR mn) Q1FY21 Q1FY20 YoY (%) Q4FY20 QoQ (%) Comments Interest income 14,117 14,864 (5.0) 14,495 (2.6) Interest expense 5,375 5,316 1.1 5,463 (1.6) Net interest income 8,742 9,548 (8.4) 9,032 (3.2) Revenue momentum soft owing to >40bps QoQ NIM dip and softer AUM growth Non-interest income 29 9 231.8 6 363.5 Net revenues 8,771 9,557 (8.2) 9,038 (3.0) Operating expenses 3,105 3,695 (16.0) 3,882 (20.0) Operating profit 5,666 5,862 (3.3) 5,157 9.9 Provisions 3,102 2,021 53.5 3,127 (0.8) Provisioning remained elevated as company made iNR4bn towards COVID Profit before tax 2,564 3,841 (33.2) 2,029 26.4 Tax expense 642 1,309 (51.0) 498 28.7 Profit after tax 1,923 2,532 (24.1) 1,531 25.6 EPS (INR) 29.1 38.4 (24.1) 23.2 25.6

Key Metrics AUM 2,95,470 2,86,460 3.1 2,97,220 (0.6) AUM growth was softer - a trend expected to sustain in near to medium term Non-gold 2,66,880 2,58,820 3.1 2,67,930 (0.4) Gold 28,590 27,640 3.4 29,290 (2.4) Disbursements 58,220 45,830 27.0 52,010 11.9 Non-gold 39,780 32,750 21.5 35,510 12.0 Gold 18,440 13,080 41.0 16,500 11.8 Gross Stage-3 (%) 8.5 9.1 8.7 Headline asset quality came in lower but sustainability is question NNPA (%) 5.0 5.2 5.1 Shriram Housing Finance AUM 21,000 17,210 22.0 18,750 12.0 Disbursements 3,860 110 NA 980 293.9 GNPA (%) 2.7 3.2 3.0 NNPA (%) 2.1 2.4 2.4 Source: Company, Edelweiss research

2 Edelweiss Securities Limited Shriram City Union Finance

Financial snapshot (INR mn) Year to March Q1FY21 Q1FY20 Growth (%) Q4FY20 Growth (%) FY20 FY21E FY22E Operating income 14,117 14,864 (5.0) 14,495 (2.6) 56,626 56,263 58,333 Interest expended (5,375) (5,316) 1.1 (5,463) (1.6) (20,456) (19,447) (19,683) Net operating income 8,742 9,548 (8.4) 9,032 (3.2) 36,170 36,815 38,651 Other income 29 9 231.8 6 363.5 1,720 1,915 2,325 Net revenues 8,771 9,557 (8.2) 9,038 (3.0) 37,890 38,731 40,976 Operating expenses (2,904) (3,492) (16.8) (3,679) (21.1) (14,290) (14,874) (16,026) Pre-provision profit 5,867 6,065 (3.3) 5,360 9.5 23,600 23,857 24,950 Provisions and write off (3,102) (2,021) 53.5 (3,127) (0.8) (9,010) (11,041) (11,865) Operating profit 2,765 4,044 (31.6) 2,233 23.9 14,590 12,816 13,085 Depreciation (201) (203) (1.0) (203) (1.2) (824) (695) (702) Profit before tax 2,564 3,841 (33.2) 2,029 26.4 13,765 12,121 12,383 Tax (642) (1,309) (51.0) (498) 28.7 (3,607) (3,030) (3,096) Profit after tax 1,923 2,532 (24.1) 1,531 25.6 10,159 9,091 9,287 Diluted EPS (INR) 29.1 38.4 (24.1) 23.2 25.6 153.8 137.6 140.6

Ratios (%) Cost/income 35.4 38.7 42.9 39.9 40.2 40.8 Tax rate 25.0 34.1 24.6 26.2 25.0 25.0 Valuation metrics Book value per share (INR) 1,088.8 1,194.9 1,303.9 Adjusted book value/share (INR) 964.6 1,009.4 1,076.1 Price/ BV (x) 0.6 0.6 0.5 Price/Earnings (x) 4.5 5.0 4.9

3 Edelweiss Securities Limited Banking and Financial Services

Q1FY21 Concall takeaway On the current environment  Will not be aggressive in lending for some time and fresh disbursements will be done after meeting customers and assessing their cash flow mechanics  June saw decent momentum in disbursements – 2Wheelers and gold loans; Hopeful of sustaining the same  Marginally improved cost; As a result, Cost/Income ratio improved to 35.4% in Q1FY21 as compared to 38.4% in Q1FY20  Manpower rationalization will continue for at least 2 more quarters  Comfortable with the current liquidity position o Raised fresh resources of INR10.5bn in current quarter o Fixed Deposit subscriptions continued to grow stronger o Focused on raising long term liquidity  Recently obtained license from IRDAI to cross sell insurance products; Fee received from this line of business in Q1FY21 was INR 50mn  Housing subsidiary also getting back to normalcy in terms of business momentum; Other operating metrics improving  Management prefers to give extra time to customers to pay rather than restructure existing loans and make things look good optically; However, approach will depends on guidelines of RBI  No clarity on merger as of now  Recently started branches in East India and hence it will take some time for penetration  North India is fairly more penetrated – o Idea of the company is to start with a small ticket size and then expand as they learn local nuances o Share of North India in overall AUM will go up eventually

On asset quality and provisioning  Collection efficiency continued to improve month on month and stands at 71% for June,2020 (vs. 52% for May,2020) o According to the management, this is a better indicator of the health of the loan book – as it illustrates the percentage of people getting back to normal business activity levels  Collections were as follows o In the month of April INR5.6bn was collected o/w collection against gold loan was zero o In the month of May INR10bn was collected o/w collection against gold loan was INR3bn o In the month of June INR14bn was collected o/w collection against gold loan was INR4bn  A COVID specific provision of INR1.8bn was made in Q1FY21; Aggregate COVID-related provisioning now is INR6.1bn (2.13% of AUM)

4 Edelweiss Securities Limited Shriram City Union Finance

Company Description SCUF was incorporated in 1986 as a deposit accepting NBFC. Prior to 2002, it was exclusively engaged in transport finance with special emphasis on financing pre-owned commercial vehicles to small road transport operators. In 2002, it extended its product lines to include small-ticket retail financing, viz., consumer durables, two wheelers, personal, and enterprise loans. It deliberately went slow on disbursements in the CV segment, which has become a key area of its group company Shriram Transport Finance. The company's operations are largely concentrated in the southern states like Andhra Pradesh, Tamil Nadu, and Karnataka and the western region (particularly Maharashtra).

Investment Theme SCUF follows a unique and sound business model with presence in high-yielding, high growth, small-ticket retail finance segment (auto loans, personal loans, business finance, and retail gold loans), and RoA of 3.5-% plus. Events over the past couple of years (demonetisation and GST) had put to test SCUF’s resilience, particularly given its dependence on the self-employed segment. The company has not been aggressive on the growth front and maintained a well-matched ALM, which should help it sail through the currently challenging operating environment. Covid-19, additionally renders the near-term outlook for the company challenging, especially the all-important SME segment. Post-crisis, we expect operating leverage and credit cost containment (sub-3%) to support RoA of 3.5% and RoE of 17%-plus. At CMP, the stock trades at 0.6x FY21E P/ABV. We maintain ‘BUY/SO’.

Key Risks SCUF operates in the small-ticket retail finance segment in semi-urban and rural areas and may face stiff competition from banks, other financial institutions, and multinational players, which have access to cheap funds. Our earnings estimates may not fructify if the company is unable to maintain its spreads at expected levels due to inability to maintain yields amidst stiff competition.

5 Edelweiss Securities Limited Banking and Financial Services

Financial Statements Key Assumptions Income statement (INR mn) Year to March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E Macro Interest income 56,100 56,626 56,263 58,333 GDP(Y-o-Y %) 6.8 5.0 5.8 6.5 Interest expended 19,763 20,456 19,447 19,683 Inflation (Avg) 3.4 4.3 4.8 5.0 Net interest income 36,337 36,170 36,815 38,651 Repo rate (exit rate) 6.3 5.2 4.5 5.0 Other income 1,776.21 1,719.71 1,915.32 2,325.26 USD/INR (Avg) 70.0 71.5 71.0 70.0 Net revenues 38,114 37,890 38,731 40,976 Sector Operating expense 14,997 15,114 15,568 16,728 Credit growth 14.0 11.0 13.0 15.0 - Employee exp 8,227 8,475 8,923 9,747 Borrowings growth (%) 13.0 12.0 14.0 15.0 - Depn /amortisation 340 824 695 702 Bank's base rate (%) 9.0 8.7 8.5 8.5 - Other opex 6,430 5,815 5,950 6,279 Wholesale borr. cost (%) 8.5 8.5 8.3 8.1 Preprovision profit 23,116 22,775 23,163 24,248 G-sec yield 7.0 7.1 7.1 7.1 Provisions 7,956 9,010 11,041 11,865 Company Profit Before Tax 15,161 13,765 12,121 12,383 Balance sheet assumption (%) Less: Provision for Tax 5,273 3,607 3,030 3,096 Op. metric assump. (%) Profit After Tax 9,888 10,159 9,091 9,287 Yield on advances 19.3 18.9 18.5 18.1 Shares o /s (mn) 66 66 66 66 Cost of funds 9.3 9.6 9.5 9.4 Basic EPS (INR) 149.9 153.8 137.6 140.6 Net interest margins 13.6 13.1 13.3 13.5 Diluted shares o/s (mn) 66 66 66 66 Dividend income 18 19 23 22 Adj. Diluted EPS (INR) 149.9 153.8 137.6 140.6 Employee cost growth 17.0 3.0 5.3 9.2 Dividend per share (DPS) 23.0 25.0 27.0 27.0 Other opex growth 2.8 (9.6) 2.3 5.5 Dividend Payout Ratio(%) 18.0 19.0 22.9 22.5 Disbursement growth (3.4) (5.6) 5.7 11.4

Securit. during the yr 9,000.0 9,000.0 9,000.0 9,000.0 Growth ratios (%) Bad debt written off 2.3 2.7 1.6 1.6 Year to March FY19 FY20 FY21E FY22E Gross NPLs 8.7 7.9 11.5 14.0 Operating income growth 11.0 (0.5) 1.8 5.0 Prov Cov 69.1 49.0 50.0 53.0 Revenues 11.0 (0.6) 2.2 5.8 Net NPLs 2.7 4.4 6.5 7.7 Opex growth 10.1 0.8 3.0 7.5 PPP growth 11.6 (1.5) 1.7 4.7 Adjusted Profit 48.8 2.7 (10.5) 2.2

Operating ratios Year to March FY19 FY20 FY21E FY22E Yield on assets 21.0 20.5 20.4 20.4 Cost of funds 9.3 9.6 9.5 9.4 Net interest margins 13.6 13.1 13.3 13.5 Spread 11.7 10.9 10.9 10.9 Cost-income 39.3 39.9 40.2 40.8 Tax rate 34.8 26.2 25.0 25.0

6 Edelweiss Securities Limited Shriram City Union Finance

Balance sheet (INR mn) RoE decomposition (%) As on 31st March FY19 FY20 FY21E FY22E Year to March FY19 FY20 FY21E FY22E LIABILITIES - - - - Op. income /Assets 14 13 13 13 Share capital 659 660 660 660 Net int. income/assets 14.3 13.7 14.0 14.3 Reserves & Surplus 62,982 71,203 78,202 85,397 Other income/Assets 0.7 0.6 0.7 0.8 Net worth 63,642 71,863 78,862 86,057 Operating expense/assets (5.6) (5.5) (5.6) (5.8) Subordinate debt 15,307 16,307 17,307 18,307 Provisions/assets (3.0) (3.3) (4.0) (4.1) Secured loans 184,096 167,970 165,642 171,914 Taxes/assets (2.0) (1.3) (1.1) (1.1) Unsecured loans 21,623 21,723 21,823 21,923 Total costs/assets (10.6) (10.0) (10.7) (11.1) Def. Tax Liability (net) (250) - - - ROA 3.7 3.7 3.3 3.2 Total liabilities 284,417 277,863 283,633 298,201 Equity/assets 22.3 24.5 27.3 28.8 Loans 295,833 290,850 304,126 326,405 ROAE (%) 16.6 15.0 12.1 11.3 Investments 730 730 730 730

Total current assets 11,621 6,616 4,847 3,141 Valuation parameters Total Current Liab 28,755 25,067 30,600 36,400 Year to March FY19 FY20 FY21E FY22E Net current assets (17,134) (18,451) (25,753) (33,259) Adj. Diluted EPS (INR) 149.9 153.8 137.6 140.6 Fixed assets 4,988 4,733 4,531 4,325 Y-o-Y growth (%) 48.8 2.6 (10.5) 2.2 Total assets 284,417 277,863 283,633 298,201 BV per share (INR) 965.4 1,088.8 1,194.9 1,303.9 Loan growth 8.1 (1.7) 4.6 7.3 Adj. BV per share (INR) 886.8 964.6 1,009.4 1,076.1 EA growth 9.8 (2.3) 2.2 5.3 Diluted P/E (x) 4.4 4.3 4.8 4.7 Provision coverage 69.1 49.0 50.0 53.0 Price/ Adj. BV (x) 0.7 0.7 0.7 0.6 Gross NPA ratio 8.7 7.9 11.5 14.0 Dividend Yield (%) 3.5 3.8 4.1 4.1

Net NPA ratio 2.7 4.4 6.5 7.7

Diluted P/E (X) P/B (X) ROAE (%) Name FY21E FY22E FY21E FY22E FY21E FY22E Shriram City Union Finance 4.8 4.7 0.6 0.5 12.1 11.3 HDFC 17.0 15.0 2.6 2.4 12.2 12.0 Indiabulls Housing Finance 4.9 3.8 0.6 0.6 12.9 15.5 LIC Housing Finance 4.8 4.2 0.7 0.6 14.9 15.3 Mahindra & Mahindra Financial Services 10.9 8.8 0.9 0.9 8.7 10.4 Manappuram Finance 8.9 7.7 2.2 1.9 26.8 26.9 Muthoot Finance 14.1 12.5 3.2 2.7 25.3 23.6 REC - - - - 15.7 17.6 Repco Home Finance 2.3 2.0 0.4 0.3 17.2 17.1 Shriram Transport Finance 4.4 3.9 0.8 0.6 18.6 17.9 Median 4.8 4.0 0.7 0.6 15.3 16.3 AVERAGE 5.5 4.7 1.1 1.0 16.4 16.7 Source: Edelweiss research

7 Edelweiss Securities Limited Banking and Financial Services

Additional Data Directors Data Debendranath Sarangi Chairman Yalamati Srinivasa Chakravarti Managing Director & CEO Diwakar Bhagwati Gandhi Director Duruvasan Ramachandra Director Maya Swaminathan Sinha Director Pranab Prakash Pattanayak Director Ramarao Muralidharan Coimbatore Director Ranvir Dewan Director Shashank Singh Director Venkataraman Murali Director Ignatius Michael Viljoen Director

Auditors - G.D. Apte & Co. *as per last annual report

Holding – Top10 Perc. Holding Perc. Holding Shriram capital ltd 33.89 Dynasty acq fpi ltd 20.34 Piramal enterprises 9.97 East bridge cap mast 5.89 East bridge capital 3.88 Matthews intl capita 2.63 East bridge capital 2.49 Ward ferry mangement 2.43 Wf asian smaller com 2.3 Aditya birla sun lif 1.97

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

No Data Available

*in last one year

8 Edelweiss Securities Limited RATING & INTERPRETATION

Company Absolute Relative Relative Company Absolute Relative Relative reco reco risk reco reco Risk Aavas Financiers REDUCE SU M Aditya Birla Capital BUY SO H Axis Bank HOLD SO M Bajaj Finserv REDUCE SU L Bank of Baroda BUY SU M DCB Bank BUY SP M Equitas Holdings BUY SO M Federal Bank BUY SO L HDFC BUY SO L HDFC Bank BUY SO L ICICI Bank BUY SO L IDFC FIRST BANK HOLD SP L Indiabulls Housing Finance HOLD SU M IndusInd Bank HOLD SO L Kotak Mahindra Bank BUY SP M L&T Finance Holdings HOLD SP M LIC Housing Finance BUY SO M Magma Fincorp BUY SP M Mahindra & Mahindra Financial Services BUY SP M Manappuram Finance HOLD SU H Max Financial Services BUY SO L Multi Commodity Exchange of India REDUCE SP M Muthoot Finance BUY SO M Power Finance Corp BUY SP M Punjab National Bank UNDER REVIEW SU M REC BUY SP M Repco Home Finance BUY SP M Shriram City Union Finance BUY SP M Shriram Transport Finance BUY SO M South Indian Bank BUY SP M State Bank of India BUY SO L Union Bank Of India HOLD SU M Yes Bank BUY SP M

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model SECTOR RATING

Ratings Criteria Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return

9 Edelweiss Securities Limited Banking and Financial Services

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]

Aditya Narain

Head of Research [email protected]

Coverage group(s) of stocks by primary analyst(s): Banking and Financial Services Aavas Financiers, Aditya Birla Capital, AU Small Finance Bank Ltd, Axis Bank, Bajaj Finserv, Bank of Baroda, DCB Bank, Equitas Holdings, Federal Bank, HDFC, HDFC Bank, HDFC Life Insurance Company Ltd, ICICI Bank, ICICI Lombard General Insurance Company Ltd, IDFC FIRST BANK, Indiabulls Housing Finance, IndusInd Bank, ICICI Prudential Life Insurance Company Ltd, Kotak Mahindra Bank, LIC Housing Finance, L&T Finance Holdings, Max Financial Services, Multi Commodity Exchange of India, Manappuram Finance, Magma Fincorp, Mahindra & Mahindra Financial Services, Muthoot Finance, Punjab National Bank, Power Finance Corp, REC, Repco Home Finance, SBI Life Insurance Company Ltd, State Bank of India, Shriram City Union Finance, Shriram Transport Finance, South Indian Bank, Union Bank Of India, Yes Bank Recent Research

Date Company Title Price (INR) Recos

10 -Aug-20 Bank of Long road ahead; valuation 49 Buy Baroda comfort; Result Update

10-Aug-20 DCB Bank Steady quarter; evolution of 83 Buy moratorium pool is key; Result Update 07-Aug-20 REC Steady quarter; forex drives 107 Buy earnings volatility; Result Update

Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation

Buy Hold Reduce Total Rating Expected to

Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12-month period * 1stocks under review Hold appreciate up to 15% over a 12-month period > 50bn Between 10bn and 50 bn < 10bn 743 Reduce depreciate more than 5% over a 12-month period Market Cap (INR) 156 62 11 594

One year price chart 446 1,700

(INR) 297 1,400 149 1,100

(INR)

- 800

14 14

- -

- 500

Jul

Jan

Jun

Oct

Apr

Sep Feb

Dec Aug

Nov

Mar May

200

19 20

19 20 20

20 20

- - -

- -

Jul

Jan

Jun

Oct

Apr

Sep Feb

Dec

Aug Aug

Nov Mar May Shriram City Union Finance

10 Edelweiss Securities Limited

Shriram City Union Finance

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11 Edelweiss Securities Limited

Banking and Financial Services

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Shriram City Union Finance

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In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).

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Disclaimer for Canadian Persons This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst. This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person. ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.

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13 Edelweiss Securities Limited